Don’t miss your opportunity to make a 2025 IRA contribution — whether you can deduct it or not

Generally, each year you can contribute up to the annual limit to a traditional or Roth IRA (or a combination of the two). But once the contribution deadline has passed, the opportunity to contribute for that year is lost forever. The deadline for 2025 IRA contributions is April 15, 2026. You may be eligible to deduct all or part of your IRA contribution and save taxes on your 2025 return. But even if you can’t claim a deduction, contributing can still be beneficial.

HOW MUCH CAN YOU CONTRIBUTE?

For 2025, the IRA contribution limit is $7,000. If you’re age 50 or older, you can make an additional $1,000 catch-up contribution.

Generally, contributions can’t exceed the IRA owner’s earned income. However, spousal IRAs allow contributions to be made to an IRA in a nonworking spouse’s name based on the working spouse’s earned income.

The contribution limit applies to traditional and Roth IRAs on a combined basis. So, assuming you’re eligible, you can contribute $7,000 to a traditional IRA or $7,000 to a Roth IRA or split the limit in any combination that doesn’t exceed $7,000.

ARE YOU ELIGIBLE TO DEDUCT YOUR CONTRIBUTIONS?

Deductible traditional IRA contributions reduce your current tax bill. Earnings in the IRA are also tax deferred. However, every dollar you withdraw is taxed and may be subject to a 10% penalty before age 59½ unless an exception applies.

You can make a fully deductible contribution to a traditional IRA if you and your spouse (if married) aren’t active participants in an employer-sponsored retirement plan.

If you or your spouse are active participants in an employer plan, your deduction may be partially or fully phased out based on your modified adjusted gross income (MAGI). For 2025, the deduction phases out over the following ranges:

  • If you’re single or a head of household: $79,000 to $89,000
  • If you’re married filing jointly and covered by an employer plan: $126,000 to $146,000
  • If you’re married filing jointly and not covered but your spouse is: $236,000 to $246,000
  • If you’re married filing separately and lived with your spouse during 2025: $0 to $10,000

If your MAGI falls within the applicable range, you may deduct a portion of your contribution. If it exceeds the range, the deduction is not allowed.

ARE YOU ELIGIBLE TO MAKE ROTH IRA CONTRIBUTIONS?

Contributions to a Roth IRA aren’t deductible. However, qualified withdrawals are tax-free if the account has been open at least five years and you’re age 59½ or older.

For 2025, the ability to contribute phases out over the following MAGI ranges:

  • If you’re single or a head of household: $150,000 to $165,000
  • If you’re married filing jointly: $236,000 to $246,000
  • If you’re married filing separately and lived with your spouse during 2025: $0 to $10,000

If your income falls within the range, you can contribute a reduced amount. If it exceeds the range, you can’t contribute to a Roth IRA.

SHOULD YOU MAKE NONDEDUCTIBLE TRADITIONAL IRA CONTRIBUTIONS?

If your income is too high to qualify for a Roth IRA or deductible traditional IRA, a nondeductible traditional IRA contribution may still be beneficial. While it won’t reduce your current taxes, the investment can grow tax deferred.

When you take qualified withdrawals, only the earnings portion is taxable. Your original contributions are tax-free because they were made with after-tax income.

If you don’t already have a traditional IRA, this strategy can also be used to create a “backdoor” Roth IRA. You make a nondeductible contribution to a traditional IRA and then convert it to a Roth IRA.

In most cases, Roth conversions are taxable. However, in this scenario, tax is only due on any earnings generated between the contribution and conversion.

WHAT ELSE IS THERE TO CONSIDER?

Making a 2025 IRA contribution can provide tax savings now or in retirement, along with the benefit of tax-deferred or tax-free growth. However, contributions must be made by April 15, 2026, even if you file an extension.

Be sure to designate the contribution for the 2025 tax year when making it. If you have questions about IRA contributions or other retirement strategies, contact your AHP representative.


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